Tribunal upholds decision on tax evasion appeal under Finance Act 1994

The tribunal upheld the lower authorities' decision, rejecting the appellant's appeal against the penalty under Section 78 of the Finance Act 1994. The appellant's actions were deemed as evading Service Tax with intent, as they collected but did not remit the tax, indicating no ignorance of the law. The judgment was pronounced on 29.6.2015.

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Issues:
Contestation of penalty under Section 78 of the Finance Act 1994 for non-payment of Service Tax on certain services; Admissibility of Cenvat Credit on services paid under reverse charge mechanism.

Analysis:
The appellant contested the penalty under Section 78 of the Finance Act 1994, arguing that the entire Service Tax demand along with interest had been paid before the show cause notice was issued. The appellant, registered with the Central Excise Dept., availed Cenvat Credit on various services. The appellant claimed that Service Tax paid under reverse charge mechanism was admissible as Cenvat Credit, indicating no intention to evade tax. The appellant relied on the case law of Bhagwati Caters Pvt Ltd vs CST, Ahmedabad [Order No A/11751/2013 dated 20.12.2013].

The Revenue, represented by the Authorized Representative, contended that the case law cited by the appellant was not applicable as the appellant did not contest financial hardships and was recovering Service Tax from customers without remitting it. The Revenue argued that the appellant was not paying Service Tax to some extent before filing periodical returns.

Upon hearing both parties and examining the case records, the tribunal noted that the appellant did not dispute the payment of Service Tax but contested the imposition of penalty under Section 78. It was observed that the appellant was recovering Service Tax from customers and was registered with the Central Excise Dept. for services requiring payment under reverse charge mechanism. The tribunal found that the appellant did not claim financial hardship and failed to file required periodical returns, leading to non-payment detection through special investigation. The tribunal concluded that the appellant's actions constituted evasion of Service Tax with intent, as they collected but did not remit the tax, indicating no ignorance of the law.

In light of the above, the tribunal upheld the order of the lower authorities, rejecting the appellant's appeal against the penalty under Section 78 of the Finance Act 1994. The judgment was pronounced on 29.6.2015.

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